For the past year, pizza chains have been on a roll, as consumers stuck at home get tired of cooking and decide to order delivery.
That was expected to slow down by now. Consumers are getting vaccinated. More states are opening up markets to dine-in service, presenting a level of competition for the food dollar that simply hasn’t been there over the past 14 months in the form of casual dining.
And, after all, who wants to keep ordering pizza when you can eat in a restaurant now?
But that’s not happening. And the result has executives of big pizza chains increasingly confident they can continue to generate sales growth even as comparisons get difficult.
“We’ve had a solid April,” Papa John’s CEO Rob Lynch said in an interview. “We feel great about the start of Q2.” So great, in fact, that the company has now forecast “flat to slightly positive” same-store sales this quarter.
That would be some feat. Papa John’s generated 28% same-store sales growth in the second quarter a year ago. Generating sales growth on top of a quarter like that is, well, difficult.
Based on current two-year trends at the chain, such a feat is doable. Papa John’s same-store sales rose over 31% in the first quarter on a two-year stacked basis. Simply maintaining that pace would easily put it over its prior-year sales.
Domino’s isn’t quite on that same path, but its sales trends also improved on a two-year basis. Same-store sales rose more than 15% over 2019 numbers in the first quarter.
The chain’s same-store sales increased 16% in the second quarter a year ago, so the company has some work to do to get into positive territory. “We’ve got some pretty strong laps ahead of us from the second and third quarters of last year,” CEO Ritch Allison told investors last week.
But, he said, “As I look out across the rest of the year, we are really in an enviable position.”
That the pizza chains could even come close to equaling some of those year-ago numbers would have been almost unthinkable not all that long ago. Yet consumers continue to order a lot more pizza.
According to the marketing data firm Zenreach, foot traffic at pizza restaurants is up 27% this year through April 30.
And Americans are spending a lot of money right now. Domino’s executives, for instance, noted that they saw sales growth in January, after the first stimulus checks arrived, and then in March when the second checks showed up.
Stimulus payments have provided an enormous boost to restaurants, but for now at least it appears that people are simply using restaurants more often in whatever method they prefer—whether it’s takeout and delivery or if it’s dine-in. Casual dining chains have seen strong growth over 2019 numbers in April, for instance. Fast-food chains of all sorts are growing, too, and third-party delivery sales remain strong.
It remains to be seen whether this trend continues. But pizza executives also believe they have strategies in place to convince consumers to come in, anyway.
That includes ad funds. The thing about all of this sales growth in a pair of franchises is it increases how much franchisees contribute into ad funds. And that gives the companies more funding to market their pizzas.
“We’ve got a fantastic advertising war chest,” Allison said, adding that the company has other tools it could use to get customers in the door that it didn’t use last year, when so many customers were ordering anyway.
“As customer patterns continue to change, as the economy continues to open up, we feel confident that we’ve got a set of tools to continue to grow our business.”
Said Lynch: “As we put up big sales numbers that generates a lot more marketing revenue than we have forecasted. We are taking those marketing dollars and pouring that into the business.”